Too Little Too Late: FCC Finally Realizes AT&T's Zero Rating Is Anti-Competitive

from the thanks-for-the-help dept

For much of the last year we've talked about how the FCC's decision not to ban zero rating (or the practice of exempting some content from usage caps) when crafting net neutrality rules was a horrible oversight. As we warned initially, it simply opened the door to wireless carriers and ISPs abusing net neutrality in entirely new and creative ways. As a result, despite having net neutrality rules, we now have companies like AT&T, Verizon and Comcast all exempting their own streaming content from the caps while still penalizing smaller streaming startups and competitors.

While the anti-competitive implications of this should have been clear to most people, the FCC apparently decided it was best not to ban the practice, instead promising to enforce net neutrality on a "case by case basis." But outside of launching a glacial-moving "informal information inquiry" last year, the FCC had given no indication it planned to actually protect this aspect of net neutrality. That was until last week, when the agency fired off a letter to AT&T stating that its plans to exempt its upcoming "DirecTV Now" streaming service is technically anti-competitive and could harm consumers and competitors:

"In the letter to AT&T from the FCC's Jon Wilkins, the agency states that this behavior "may obstruct competition and harm consumers by constraining their ability to access existing and future mobile video services not affiliated with AT&T."

"It is not difficult to calculate usage scenarios in which an unaffiliated provider's Sponsored Data charges alone could render infeasible any third-party competitor's attempt to compete with the $35 per month retail price that AT&T has announced for DIRECTV Now," the letter said. "Unaffiliated video providers not purchasing Sponsored Data would likewise face a significant competitive disadvantage in trying to serve AT&T Mobility's customer base without zero-rating."

And while it's great the FCC finally woke up to the fact that ISPs are using caps to both raise rates on uncompetitive markets and hamstring streaming competitors, the FCC's letter is almost comical in how late in the game it has finally arrived. Given that the man heading up Trump's telecom transition team (Jeffrey Eisenach) is a paid consultant and think tanker with ties to large broadband providers, there's every indication a Trump Presidency will go easier on incumbent ISPs like AT&T and Comcast than ever before.

As a result, the FCC's move here should generally be seen as the agency giving a pointless lecture on playing with matches after the barn has burned down. For what it's worth, AT&T is simply responding to the inquiry by claiming it can't possibly be acting anti-competitively because other companies can get cap-excempt status too -- provided they pay AT&T significantly more money:

"While we welcome additional questions, we hope the FCC will consider the enormous value consumers find in obtaining free data or free streaming where someone else is footing the bill for their data. We welcome any video provider that wishes to sponsor its content in the same “data free” way for AT&T Mobility customers and we’ll do so on equal terms at our lowest wholesale rates," the company added. "Saving consumers money is something we all should support."

In short, you've got a company using arbitrary usage caps to give its own content a leg up, and a regulator that couldn't be bothered to see the negative impact of this behavior apparently until it had one foot out the door of governance. Where we head now isn't clear, but I think it's fairly apparent that all of the griping concerning usage caps and zero rating will likely seem downright quaint in around three to six months.

Filed Under: competition, fcc, net neutrality, zero rating
Companies: at&t

Facebook Wants To Bring Controversial Zero Rated 'Free Basics' Service To The States

from the we're-helping! dept

Last year the Indian government forged new net neutrality rules that shut down Facebook's "Free Basics" service, which provided a Facebook-curated "light" version of the internet -- for free. And while Facebook consistently claimed its program was simply altruistic, critics (including Facebook content partners) consistently claimed that Facebook's concept gave the company too much power, potentially harmed free speech, undermined the open nature of the Internet, and provided a new, centralized repository of user data for hackers, governments and intelligence agencies.

In short, India joined Japan, The Netherlands, Chile, Norway, and Slovenia in banning zero rating entirely, based on the idea that cap exemption gives some companies and content a leg up, and unfairly distorts the inherently level internet playing field. It doesn't really matter if you're actually altruistic or just pretending to be altruistic (to oh, say, lay a branding foundation to corner the content market in developing countries in 30 years); the practice dramatically shifts access to the internet in a potentially devastating fashion that provides preferential treatment to the biggest carriers and companies.

Fast forward a year and Facebook is now considering bringing the controversial service to the United States. The company has apparently been in talks with the White House about getting the idea rolling in the U.S., without setting off the same kind of regulatory alarm bells it faced in India:

"The effort to offer a U.S.-based version of Free Basics is moving forward in fits and starts, said the people, who spoke on the condition of anonymity because the effort has not been publicly revealed. In particular, the company wants to ensure that Free Basics will be viewed favorably by the U.S. government before it launches, thus avoiding a costly repeat of its experience in India."

Again, India reacted poorly not because Facebook was giving away "free stuff," but because Facebook was trying to install itself as the 90's AOL of the modern internet. Content partners dropped out because they didn't like Facebook dictating which websites and services get to be "zero rated." Companies like Mozilla suggested that if Facebook really wants to help the world's poor, it can start by funding access to the actual Internet. Facebook, annoyed by those who don't believe it's being purely altruistic, responded by calling such critics "extremists" who are hurting the poor.

The fight comes to US shores as the country is already facing a growing array of problems thanks to zero rating. Whereas India banned the practice, the FCC passed net neutrality rules that don't ban it outright, opening the door to companies trampling net neutrality if they're just creative enough. As a result, Comcast, Verizon and AT&T all now exempt their own streaming content from caps while still penalizing Netflix. Similarly T-Mobile and Sprint have now started throttling video, music and games unless customers pay a steep monthly premium.

So while the FCC twiddles its thumbs to what's quickly becoming a growing problem (unless you're an ISP or a deep-pocketed content company), Facebook is looking to get in on the ground floor of a concept that professes to be "helping" while dramatically changing the way access to the internet works. Amusingly, the social media giant appears to be treading so carefully, it's refusing to strike deals with big carriers out of an obvious fear of anti-competitive criticism:

"Facebook has not attempted to strike a deal with national wireless carriers such as T-Mobile or AT&T, said the people familiar with the matter, over concerns that regulators may perceive the move as anti-competitive. Instead, it has pursued relationships with lesser-known carriers."

Again, if you want to help low-income global citizens access to the internet -- doesn't it just make more sense to help fund connections to the actual internet?

Filed Under: blocking, fcc, free basics, limits, net neutrality, throttling, us, zero rating
Companies: facebook

AT&T Will Zero Rate its Upcoming Streaming TV Service, Doesn't Think FCC Will Act

from the one-for-you,-three-for-me dept

We've long noted how the FCC's decision to avoid prohibiting zero rating (exempting your own or a paid partner's content from usage caps) opened the door to letting incumbent ISPs trample net neutrality -- if they're just creative enough about it. And that's precisely what has happened, with Comcast and Verizon now exempting their own content from usage caps, while T-Mobile and Sprint explore throttling all video, games and music unless users pay a $20 to $25 leave me the hell alone fee.

The FCC's total inaction on this front has also emboldened AT&T, which recently began exempting its own DirecTV streaming video app from the company's usage caps while still penalizing customers that use competitors like Netflix, Hulu or Amazon. But as we warned then -- AT&T isn't done. This week it confirmed that it will also zero rate its upcoming DirecTV Now streaming video service, which is AT&T's massive new entry into the streaming video market:

“We’ll be rolling it out in a couple of months,” Stephenson told attendees at an investors conference. “We’re talking 100-plus channels at a very, very aggressive price point. And when you buy this content, the data required to stream it onto your mobile device is incorporated into the price of the content…. If you choose to use that in a mobile environment on AT&T, your data cost is incorporated into your content cost."

That's a pretty clever logical tap dance. AT&T isn't unfairly giving its own content a leg up in the streaming video market, you see, it's just "incorporating" the cost of wireless data into your content costs. Either way you slice it, AT&T is using its stranglehold over the fixed and wireless markets to give its own content an unfair advantage, and you'd be pretty hard pressed to find too many tech beat writers, customers, or regulators that seem to give much of a damn. Why? Because under superficial inspection it looks like customers are getting something for free, even if usage caps are artificial and arbitrary constructs to begin with.

That said, AT&T is making it pretty clear it doesn't think regulators will do much about its latest anti-competitive gambit. Speaking at the recent CTIA wireless trade show in Las Vegas, AT&T Mobility President Glenn Lurie proclaimed that the company isn't worried about a regulatory crackdown:

“We have no regulatory concerns about it. We feel very good about it from that aspect. We’re not prioritizing [data], we’re treating it all the same,” Lurie told FierceWireless here on the sidelines of the CTIA Super Mobility trade show. Lurie is president and CEO of AT&T’s mobility and consumer operations. “So we’re not worried about that.”

Even though AT&T's tactic here is to basically lie and say it's treating "all data the same," it doesn't think the FCC will act. That means it's either emboldened by the FCC's apathy on this front, or it has received private indications from the agency that it doesn't intend to tread into the zero rating waters. But with large, incumbent broadband providers now using their monopoly over the last mile (and spectrum) to give their own content a leg up, you'll soon find many consumers wondering why the hell we have net neutrality rules in the first place.

Filed Under: fcc, net neutrality, streaming tv, zero rating
Companies: at&t

What Net Neutrality? While The FCC Naps, AT&T Now Exempting DirecTV Content From Wireless Usage Caps

from the slippery-slopes dept

When the FCC crafted its new net neutrality rules, we noted that the agency's failure to ban "zero rating" (exempting your own company's content from usage caps) was going to be a problem. And lo and behold, with the FCC AWOL on the subject, companies are starting to take full advantage. Verizon and Comcast now exempt their own streaming video services from usage caps without penalty, while companies like T-Mobile and Sprint have launched new confusing and punitive data plans that throttle games, music and video content -- unless users pay a premium.

These were all concepts net neutrality rules were supposed to prevent. But because the FCC's rules didn't go quite far enough, we're effectively looking at rules that make net neutrality violations ok -- provided you're just a little bit creative about it.

Outside of the vague promise of an "information inquiry" that began last January, the FCC hasn't said much of anything as ISPs test the limits of the existing rules and pretty much finds that so far -- there really aren't any. Encouraged by the FCC's apathy on the subject, AT&T this week quietly began exempting DirecTV video content from its usage caps after buying the satellite TV provider last year for $69 billion. A quiet update to the DirecTV app indicates that the company is now pushing this as a new "data free TV" option":

AT&T is getting into the messy business of zero-rating, offering wireless data subscribers the opportunity to stream video from the DirecTV mobile app with no data costs at all. According to update notes from the latest version of the app released today, users can "stream DirecTV on your devices, anywhere — without using your data."

This promise was tested by Verge staff this morning, who were able to play DirecTV content on their mobile without any noticeable impact to their data allowance. However, the release notes for the app warn that there are restrictions. Under some unspecified circumstances users may still "incur data charges," says DirecTV, and any free video streaming is subject to "network management, including speed reduction."

Much like T-Mobile's Binge On efforts (which zero rate only the biggest video services) the idea of getting something for "free" sounds wonderful upon superficial inspection. At least until you realize that AT&T's decision to give its own content an unfair leg up in this fashion puts its competitors, like Netflix and Amazon, at a distinct disadvantage. That's why so many people had urged the FCC to follow India, Japan, Finland, Iceland, Estonia, Latvia, Norway, The Netherlands, and Chile's approach to net neutrality rules and ban zero rating entirely.

The FCC didn't, and thanks to its failure, we now face a scenario where net neutrality can be trampled without repercussion -- and may even be celebrated by the press and public -- provided you just use the right shade of public relations paint.

And there's every indication AT&T's just getting started. This particular announcement (made on Apple product announcement day to capitalize on the tech media's distraction) was just AT&T dipping its toe into the zero rating water. The company plans to launch three different streaming services under the DirecTV brand later this year, and you can be fairly sure that AT&T intends to use zero rating to give all of them a distinct, and notably unfair, market advantage.

Filed Under: fcc, net neutrality, streaming, tv, zero rating
Companies: at&t, directv

T-Mobile, Sprint Tap Dance Over, Under, And Around Net Neutrality

from the bad-precedent dept

For some time now T-Mobile has been accused of violating net neutrality by exempting the nation's biggest video services from its usage caps, and throttling all video on the network by default to 1.5 Mbps or 480p. Net neutrality advocates have repeatedly warned that giving some content or companies a leg up and fiddling with service quality sets a horrible precedent, and research has shown T-Mobile's system to be unreliable and exploitable. Still, T-Mobile has so far received applause from many regulators, media outlets and customers operating under the belief consumers are getting something for free.

As such, however bad the precedent being set here, there's no real political pressure on the FCC to act since consumers are effectively applauding what many believe to be a net neutrality violation. The FCC's net neutrality rules don't specifically prohibit zero rating, something we've long argued opens the door to creative abuses of net neutrality to thunderous applause, which is effectively what's happening here. The rules do require the FCC to explore whether zero rating is anti-competitive on a "case by case" basis, but so far, outside of a few letters, the FCC doesn't seem particularly pressed to take action.

Last week, T-Mobile introduced a new wrinkle to the entire saga by unveiling a new plan named T-Mobile One. Under T-Mobile One, users get "unlimited" data (technicaly 26 GB, after which you're throttled to 128 kbps), text and voice for $70 per month. But under this new plan, users find all video services throttled by default to 1.5 Mbps or 480p. If you want to stream video at any higher rate, you'll need to pony up an additional $25 per month. Groups like the EFF were quick to argue that the new plans still violate net neutrality:

"From what we’ve read thus far, it seems like T-Mobile’s new plan to charge its customers extra to not throttle video runs directly afoul of the principle of net neutrality," said EFF senior staff technologist Jeremy Gillula.

Right, but violating net neutrality principles and net neutrality rules is not the same thing. It's generally believed the FCC didn't crack down on T-Mobile's original plans because the FCC's Open Internet Order (pdf) not only didn't ban zero rating, but it stated that some throttling is ok if it's "a choice made by the end user." Because users could opt out of T-Mobile programs Binge On and Music Freedom, T-Mobile had creatively managed to inhabit an area not really outlawed by the agency's net neutrality rules.

But the EFF argues elsewhere that T-Mobile's decision to specifically discriminate against a particular type of traffic (in this case video) could ultimately violate the FCC's net neutrality rules:

...Gillula argues that the throttling of all video might violate the rule, despite the option to pay for high-speed video. He pointed to a sentence later in the same paragraph that says, "if a broadband provider degraded the delivery of a particular application (e.g., a disfavored VoIP service) or class of application (e.g., all VoIP applications), it would violate the bright-line no-throttling rule."

"If you just substitute 'video' in for 'VoIP,' it's pretty clear that the FCC's intent was to prevent discriminatory throttling, even if the user could pay to avoid it," Gillula told Ars. "In other words, the FCC (and EFF) are just fine with ISPs offering different tiers of service, as long as the tiers don't discriminate against different types of content. But that's precisely what T-Mobile is doing here—discriminating against data based on its content."

Given past statements one gets the sense that the FCC isn't all too worried about the obvious, problematic impact usage caps and zero rating may have on the open Internet. But we're quickly getting to the point where the FCC needs to at least help detail where the line is drawn, one way or another. T-Mobile's experiments last week resulted in Sprint unveiling similar "unlimited" data plans of their own, which also throttle all video to 480p by default unless you pay a premium for higher resolution. But you'll note Sprint goes even further:

Unlimited Freedom utilizes optimization for streaming video, gaming and music, delivering a high-quality viewing experience for mobile devices with video streams of up to 480p resolution, gaming up to 2mbps and music streams at extreme quality of up to 500kbps.

If you'll pause with me at the very top of this long and slippery slope and look down, folks with even the faintest tea leaf reading ability should be able to envision one possible future where all broadband access is fragmented and fractured in just this fashion, users paying more or less for varying qualities of different content and services. This was, if you'll recall, the sort of thing net neutrality rules were designed to help us avoid. T-Mobile opposed Title II and real net neutrality rules for obvious reasons, and groups like the EFF (quite correctly) worry T-Mobile is now happily chipping away at the very foundation of an open internet...to thunderous public applause.

Filed Under: fcc, net neutrality, streaming video, throttling, unlimited, zero rating
Companies: sprint, t-mobile

Study Finds That T-Mobile's Binge On Is Exploitable, Unreliable, And Still Violates Net Neutrality

from the a-duck-is-still-a-duck dept

For a while now we've warned how "zero rating" (letting some content bypass usage caps) is a creative way for ISPs to tap dance around net neutrality --potentially to public applause. Comcast, for example, exempts its creatively-named "Stream" streaming video service from caps, but claims this doesn't violate net neutrality because the traffic never technically leaves Comcast's network. Verizon exempts its own Go90 video service from caps as well, and to date doesn't even bother justifying the move. Both AT&T and Verizon let companies pay for cap exemption.

And while these programs all laugh in the face of neutrality, many users still tend to applaud the horrible precedent because they believe -- despite paying an arm and a leg for wireless data -- that they're getting something for free.

T-Mobile has been perhaps the most creative in exploiting this belief and implementing zero rating, now exempting some 90 video services from user usage caps and throttling these services to 1.5 Mbps (or 480p) unless a user opts out. But neutrality advocates have repeatedly noted this idea still violates net neutrality given that thousands of startups, educational orgs, and non profits still aren't whitelisted -- and may not even realize they're being discriminated against.

And while T-Mobile has done some great things for consumers the last few years, T-Mobile's response to these concerns has been relatively pathetic, vacillating between lying about how the program works, to insulting net neutrality supporters like the EFF while fighting real net neutrality rules and Title II reclassification. Yet because many in the public don't understand the horrible precedent and just think it's really groovy they're getting free stuff -- T-Mobile's Binge On, happily lives on.

But a new study out of Northeastern University doesn't have much nice to say about T-Mobile's "consumer friendly" zero rating program. The researchers found numerous problems with Binge On, including the fact that T-Mobile's promise of 480p video quality is consistently less:

"T-​​Mobile says that the res­o­lu­tion for Binge On streaming is 480p (pro­gres­sive scan) or better, which is con­sid­ered stan­dard for DVD movies. How­ever, the researchers did not find evi­dence to back up these claims. In their trials using YouTube, the res­o­lu­tion was only 360p, notice­ably blurry on a modern smartphone.

They also found that T-Mobile's systems not only had trouble accurately detecting video services:

"T-Mobile’s detec­tion methods are very simple, so there’s no way they can always be right,” he says. "That means that Binge On is likely slowing down traffic that is not video. This raises serious con­cerns about com­pli­ance with the Open Internet Order."

And they found that the system was manipulable by clever T-Mobile users, potentially allowing them to zero rate services not covered by the program:

"Those simple methods open the door to exploita­tion as well, allowing sub­scribers to get free data even for non-​​video con­tent. The researchers devel­oped simple soft­ware that manip­u­lates internet traffic so that it looks like video. For example, it makes any web content—web pages, app down­loads, and photos—look like YouTube traffic. “We real­ized we could make any net­work traffic zero rated by just putting the right text in the right place," says Choffnes. "That is a secu­rity vulnerability -- it's poten­tially an open cash reg­ister that people can take from."

So in short, the report notes that T-Mobile's Binge On isn't accurate, is exploitable, and reduces video quality more than T-Mobile claims. T-Mobile (and zero rating supporters) argue that what T-Mobile's doing is ok simply because users can opt out. But the researchers noted that putting the onus to opt out on frequently non-technical consumers doesn't somehow magically mean net neutrality isn't violated by the underlying precedent. The researchers argue that regardless of public opinion on the subject -- the T-Mobile Binge On is still a net neutrality violation however you'd like to slice it:

"The internet has been hugely suc­cessful because it enables inno­va­tion, where all new internet appli­ca­tions receive the same net­work ser­vice as incumbents -- it's a level playing field," says Choffnes. "T-Mobile’s policy gives spe­cial treat­ment to video providers that work with them. What if every ISP did this, but in a dif­ferent way? In such a world, the next Net­flix, Hulu, or Pied Piper might never get off the ground because keeping up with ISPs and their poli­cies would leave them chasing their tails."

There's several reasons why we're not seeing the backlash to zero rating we've seen elsewhere in the net neutrality fight. One, again, consumers think they're getting something for free, and don't understand that usage caps are entirely arbitrary constructs to begin with, and not actually even useful for managing network congestion (should it even actually exist). Zero rating also is seeing support from companies that historically supported net neutrality (Google, Netflix) because these companies are benefiting from the additional traffic and ad eyeballs these programs send their direction.

But because consumers don't really understand the slippery slope they're happily having a picnic on -- and Silicon Valley companies are willing to turn a blind eye to these types of net neutrality violations because they profit off of them -- doesn't magically mean what T-Mobile is doing is a good idea.

With the FCC's net neutrality rules now on more secure footing after their major legal win, all eyes now turn to what the FCC intends to do about broadband usage caps and zero rating. While many countries (India, Japan, The Netherlands, Chile) understand the bad precedent at play here and have banned zero rating outright as anti-competitive, the FCC decided to weigh the anti-competitive impact of zero rating on a "case by case basis." And while the FCC is currently conducting a rather glacial inquiry into caps and zero rating, ISPs so far have been allowed to employ the practice with relative impunity.

In short, the FCC's failure to ban zero rating opened the door to net neutrality violations, provided an ISP is just clever about it. Without Netflix or Google's support, and with consumers believing they're benefiting from such models, the FCC is seeing notably less political pressure to act. So while it's wonderful that we've got shiny new net neutrality rules freshly upheld by the court system, they may wind up being useless as carriers and ISPs tap dance over, under and around them -- to thunderous public applause.

Filed Under: binge on, fcc, net neutrality, video, zero rating
Companies: t-mobile

Reddit, Mozilla, Others Urge FCC To Formally Investigate Broadband Usage Caps And Zero Rating

from the get-off-your-duff dept

We've noted how the FCC's latest net neutrality rules do a lot of things right, but they failed to seriously address zero rating or broadband usage caps, opening the door to ISPs violently abusing net neutrality -- just as long as they're relatively clever about it. And plenty of companies have been walking right through that open door. Both Verizon and Comcast for example now exempt their own streaming services from these caps, giving them an unfair leg up in the marketplace. AT&T meanwhile is now using usage caps to force customers to subscribe to TV services if they want to enjoy unlimited data.

In each instance you've got companies using usage caps for clear anti-competitive advantage, while industry-associated think tanks push misleading studies and news outlet editorials claiming that zero rating's a great boon to consumers and innovation alike.

The FCC's net neutrality rules don't ban usage caps or zero rating, unlike rules in Chile, Slovenia, Japan, India, Norway and The Netherlands. The FCC did however state that the agency would examine such practices on a "case by case" basis under the "general conduct" portion of the rules. But so far, that has consisted of closed door meetings and a casual, informal letter sent to a handful of carriers as part of what the FCC says is an "information exercise," not a formal inquiry.

But in a letter sent to FCC Commissioners (pdf) this week, a coalition of companies including Yelp, Vimeo, Foursquare, Kickstarter, Medium, Mozilla and Reddit have urged the agency to launch a more formal -- but also transparent -- probe of ISP behavior on this front:

"Zero­ rating profoundly affects Internet users' choices. Giving ISPs the power to favor some sites or services over others would let ISPs pick winners and losers online—precisely what the Open Internet rules exist to prevent...Given how many stakeholders participated in the process to make these rules, including nearly 4 million members of the public, it would be unacceptable not to seek and incorporate broad input and expertise at this critical stage."

Given the FCC's decision to ban usage caps at Charter as a merger condition, the agency is clearly aware of the threat zero rating and caps pose to a healthy Internet. It's possible the FCC is waiting for the courts to settle the broadband industry's lawsuit against the FCC, which could gut some or all of the net neutrality rules. But it's also entirely possible that the FCC does nothing. Usage caps are a glorified price hike, and even in its latest more consumer friendly iteration, the FCC has historically been afraid to so much as even acknowledge high prices are a problem in the sector.

Things have been muddied further by T-Mobile's Binge On program, which gives users the illusion of "free data" by setting arbitrary usage caps, then exempting the biggest video services from usage caps. And while many consumers applaud the idea, even T-Mobile's implementation sets a potentially dangerous precedent in that it fails to whitelist smaller video providers and non-profits -- most of which have no idea they're even being discriminated against. There's a contingent at the FCC and elsewhere that believes efforts like this are a positive example of "creative pricing experimentation."

Either way it's increasingly clear that the FCC needs to take some public position on the subject as ISPs continue to test the agency's murky boundaries to the detriment of users and small companies alike. Should the FCC win its court case, pressure will grow exponentially for the FCC to actually put its money where its mouth is -- and put the rules so many people fought for to actual use.

Filed Under: broadband, data caps, fcc, usage caps, zero rating
Companies: foursquare, kickstarter, medium, mozilla, reddit, vimeo, yelp